Straddle Option Trading

A straddle consists of buying both a call and put with the same strike price and same expiration date. A straddle is a very ideal market strategy that mainly involves playing large stock movements, time decay, and movements in implied volatility. Once a straddle is created, the trader can make money as long as the stock travels in one direction. In a long straddle, a trader has the opportunity to take advantage of any change in market price whether there is a rise or fall. Whatever the direction the market price’s moves, a long straddle option lets you in a position to take advantage of both.

There are a few idea conditions in which to purchase a option straddle . The first is when implied volatility is at a low. This is when option prices will be cheapest. Investors can then purchase options at a fraction of the price. The problem with this is that an investor never knows when implied volatility is at a low. A trader must use other means of analysis, such as The Straddle Trading Indicator.
Another ideal trading scenario for a straddle option is when the stock is about to make a significant move. The, an investor does not even have to know the direction of the breakout in order to profit. Using technical analysis such as triangle patterns, pennants, and flags can help one in identifying the when a stock will make a breaking move.

You must know that trading is a daunting task. While there are gains, a good investor also prepares for losses. The only good thing about straddle option strategies is that the trader has an unlimited profit potential using this method. The seller too may experience the same earnings. But in order for you to experience the benefits of straddle options here, which mainly focus on earning bigger profits, you have to first devote time and due diligence to make a good research on whatever stocks you wish to pursue. Normally, after a stock price or earnings have been announced, that is the best time for traders and investors like you to research on that stock, formulate your best opinion, weigh whatever strategies there are left available, then establish the type of straddle you think would best complement the stocks announced. You must not forget, straddle option trading is the most safest and efficient way to earn profits. As long as you create the right conclusion of the movement of a certain stock in the future through good research, there wouldn’t be any loss scenario in the end.